Western rare earth suppliers have been scrambling to boost
production to plug a supply gap created last year when No. 1
producer China sharply cut its exports of the metals, used in
products ranging from laptop computers to hybrid-electric cars.

Some rare earths like lanthanum and cerium are used in
petroleum refineries' fluid cracking catalysts to process heavy
oils, tars and oil shales into high octane fuel

"I have been approached by the EU about stockpiling. There
is a task force that is looking over strategic materials and
they have contacted me. They were surprised that we do tantalum
and niobium, which are also strategic materials," David O'Brock,
chief executive at U.S. Molycorp's majority-owned Molycorp
Silmet AS told Reuters in a recent interview.

O'Brock said that he suggested to the task force there is no
point to stockpile the finished elements because every single
customer uses a different quality.

"Stockpile the concentrates. Once you have the concentrates
stockpiled then you can sit back and relax and know that you
have a processor here and start feeding that concentrate to the
chemical processor, who will then make the products that the EU
customers need. It takes a month," he said.

O'Brock said he recommended to the task force that the EU
stockpile a year worth of his plant's capacity or 3,000 tonnes
of mixed rare earth carbonate.

"The one thing the EU does not want to happen is someday the
Chinese say, ‘that is it, no more lanthanum.’ Shut down your war
machines because you can’t get high octane fuel anymore for your
plane and stuff,'" O'Brock said.

Molycorp Silmet's production is stable at 3,000 tonnes and
Molycorp's U.S. operations are also 3,000 tonnes to give the
units 10 percent of the world market after China's introduction
of export quotas.

PRICES STABILISE

O'Brock said prices of rare earths have stabilised after the
sharp increases over the last year.

He said lanthanum prices were 85 cents a kilogramme in 1999
and rose $35 a kilogramme in 2010, now "the publicly available
spot prices are somewhere around $130 or $140 a kilo.”

“I think that prices have already started to stabilise. And
consumers have found their upper boundaries that they can pass
on to their customers, unless the Chinese suddenly open the
flood gates, I don’t see prices dropping and I don’t see a
continued climb in the prices," he said.

The increase in revenue has allowed the Estonian firm to
invest in upgrading the quality of its rare earth processing
with the aim of trying to keep customers from moving their
production lines to China to avoid Chinese export quotas.

"We are increasing some capacities, but I am not at liberty
to say which, but it is not volume wise, but quality wise --
boosting the quality of oxides from 99.95 percent to 99.999 or
99.995," O'Brock said.

"This requires a significant investment, but there is a
market for them. The Chinese are squeezing the companies that
use these high purity oxides, so we have a very limited time
window before they are forced to move their lines to China," he
said.

"There was one large glass producer that moved their lines
to China and it took 5,000 tonnes of cerium off the market."

The Silmet factory began processing rare earths and rare
earth metals in the early 1970s, and processed and enriched
uranium before that.

Rare earth metals produced by Molycorp Silmet include steel
ingredient niobium and tantalum, which is used in aerospace and
computer manufacturing. [ID:nLDE64A1W8] [ID:nLDE6530TW]

The factory in Estonia gets cracked or raw earth carbonates
from a mine near the Kola Peninsula close to Murmansk and now
also from Molycorp's Californian mine. Its supply of rare earth
metals come from Brazil.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For factboxes on rare earth elements, click [ID:nN09251080],
[ID:nBNG504343] [ID:nSYD28850]
Graphic on rare earth metals r.reuters.com/bam39p
Graphic on production and use r.reuters.com/nax47p
For an analysis on rare earth elements, see [ID:nN09229510]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Molycorp MCP.N, the largest U.S. producer of rare earth
metals, bought a controlling stake in Estonia-based AS Silmet
for about $89 million in April this year.

The move allowed the U.S. company to double its rare earth
oxide production capacity and feed carbonates from its U.S. mine
to its Estonian unit.

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